Energy use up despite higher prices

Residential, industrial, commercial demand growth steady

By

StephanieI. Cohen

WASHINGTON (CBS.MW) -- Higher and more volatile prices for oil and natural gas are expected to have limited impact on energy consumption in the United States over the next two decades, the Energy Department said Thursday.

Total demand for energy is expected to increase by 1.4 percent annually, or at roughly half the pace of the gross domestic product, according to Guy Caruso, the administrator of the Energy Information Administration, the statistical arm of the Energy Department.

"I don't think we're going to become a lot more energy-independent in the period we're talking about," he said during a briefing Thursday.

America will continue to consume an increasing amount of energy over the next 20 years, with total consumption expected to reach roughly 133 quadrillion British thermal units by 2025, the Energy Information Administration said in its annual energy outlook

A quadrillion Btus is equivalent to the amount of energy in 1 trillion cubic feet of natural gas or 170 million barrels of crude oil.

This year's forecast, however, does represent a slight decline, less than 1 percent, from last year's estimates, indicating some impact from considerably higher than expected prices for oil and natural gas and new estimates of industrial demand over the period, Caruso added.

To meet new demand, the United States will need the Organization of the Petroleum Exporting Countries to produce more oil, he said.

U.S. dependence on natural gas imports will witness an "enormous increase," according to Caruso. The United States will need to import 8.7 trillion cubic feet of liquid natural gas in 2025 and build a minimum of six facilities to receive the fuel in its gas form, the EIA indicated.

Energy use by the industrial sector is forecasted to increase 1.1 percent a year between 2003 and 2015, to reach 28.3 quadrillion Btus. Consumption is then expected to climb to 30.8 quadrillion Btus by 2025.

These figures are slightly lower than forecasts of a year ago, reflecting "slower projected growth in the dollar value of industrial product shipments," due to a slowdown in production growth in recent years and a reassessment of the growth potential for the chemical and pulp and paper industries, the report said.

The chemical sector has been hit hard by steep increases in natural gas prices. Natural gas is used as a fuel and feedstock in the chemical process, making the sector especially sensitive to price changes.

Residential energy consumption is also expected to grow by 1.1 percent per year between 2003 and 2015 to 13.3 quadrillion Btus, resulting from increasingly rapid growth in the number of U.S. households and higher prices for heating fuels. By 2025, residential use will likely reach 14.3 quadrillion Btus.

Commercial consumption is projected to rise 1.9 percent annually between 2003 and 2015, reflecting an increase in commercial space in the United States.

The transportation sector, the largest consumer of petroleum products, will see an 2.1 percent annual increase in energy use between 2003 and 2015, boosting consumption to 34.8 quadrillion Btus in 2015 and then 40 quadrillion Btus in 2025. These increases for transportation are a bit lower than forecasts a year ago, based on changing driving demographics, Caruso said.

But the EIA also completed a scenario that assumed oil prices of $44 per barrel, comparable to the October New York Mercantile Exchange futures contract.

If crude prices were to remain at this level, there would be a small impact on energy use by the oil-dependent transportation sector, but not on the residential, commercial or industrial sectors.

At the same time, the United States is expected to make steady increases in using energy more efficiently. Energy intensity, or the amount of energy used to do the same amount of work, is projected to decline 1.6 percent annually through 2025, the report said.

Caruso pointed out that this increase is the result of a shift to a more service-oriented economy that demands less energy.

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